On 26 October 2021 - and dates are important in this story - the Spanish Constitutional Court ruled, after a series of previous rulings, that the plusvalia municipal is in final violation of the Spanish Constitution. The sore point: the municipal capital gains tax is not calculated on an actual capital gain, but rather on a notional capital gain. So the court did not annul the tax per se, but rather the method of calculation. The ruling was to take effect from publication in the Spanish Official Gazette. However, the Spanish government amended the law on 8 November 2021, even before the judgment was published. With publication of these new regulations on 9 November 2021...
What is the plusvalia municipal?
The plusvalia municipal is a municipal capital gains tax on the sale, inheritance and donation of property. For Spanish municipalities, it is an important source of revenue.
What has changed now?
The government has changed the method of calculation. From now on, you will not be taxed if you do not realise capital gains. Specifically, the regulations offer you a choice:
- Either you opt for taxation based on the actual capital gain;
- Either you opt for a cadastral capital gain.
In addition, the new rules target speculation. In practice, if you sell property within 2 years of purchase, you will pay significantly more tax.
What about the past? Can I reclaim unlawful taxes?
Based on the latest ruling of the Constitutional Court, you basically cannot reclaim taxes. After all, the new provisions came into force before the judgment was published. And this judgment comes into force only after its own publication. Therefore, as the new legislation was published before the publication of the ruling, taxpayers cannot invoke its unconstitutionality.
One legal dispute that will potentially arise is the legal basis of the adjustments. You can compare the current legal basis of the new plusvalia municipal to a royal decree in Belgium. However, taxes have to be approved by the Spanish parliament via law. However, the parliament has not yet been able to give its opinion today.
National capital gains tax
The plusvalia municipal is separate from the national capital gains tax. This capital gains tax also applies to sales and donations.
On the face of it, the adjustment seems like a good thing for new transactions. If you do not realise a capital gain, the municipality will no longer charge you. For already completed transactions, nothing will change. You may also not be able to recover any unlawful tax.
Do you have questions about selling property in Spain? Here you can find more information about selling in Spain.